Back in the frame?

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Many analysts expect a Francois Hollande presidency to bode ill for relations between France and China. That may not come to pass.

It is true that Hollande's campaign rhetoric did hurt relations. He listed three issues that bothered him most: the trade deficit caused by China's 'dumping' practice; the renminbi exchange rate; and the idea that China could come to the rescue of Europe amid the euro crisis. The last point was particularly irksome, for that would mean China's help in perpetuating a German-led austerity campaign. A promised policy reversal was Hollande's biggest vote-getting ticket.

Nevertheless, any campaign rhetoric is ultimately constrained in practice by realities. Hollande's top priority is no doubt to loosen the austerity measures. But his leading opponent is not China, but Germany. If he does not want China to get involved in the debt-rescue operation, Beijing would feel gladly let off the hook, as it has been under daily pressure from EU leaders to buy seriously into the government bonds of the troubled countries.

Besides, the socialist rhetoric on ending austerity is not realistic, since no alternative sources are available for France to deal with the debt crisis. If France pursues an expansionary monetary policy, the crisis will worsen, as government bond yields will rise to intolerable levels. If, alternatively, the European Central Bank is encouraged to buy these bonds, it would mean massive money printing, which will devalue the euro and trigger inflation.

Moreover, a European version of 'quantitative easing' could well lead to a currency war with the US, as a cheaper euro would exacerbate American unemployment. As far as the trade relationship with China is concerned, the French market for China is important but hardly on a par with that of the US. Unless Hollande can mobilise solid European Union support, France has little real leverage in carrying out his campaign promise to initiate an 'anti-dumping' policy against China.

For decades, France has occupied a top position in China's European policy. Now that may have been lost to Germany. China and Germany share a common aversion to debt and inflation, as the two countries have horrible memories of financial debacles in history - the hyperinflation in Germany in the early 1920s that helped the Nazis come to power, and the financial collapse in China in 1948 that brought down the nationalist regime. Irresponsible overspending must be cured by austerity: this is the consensus between Berlin and Beijing. If France alienates its best friend Germany over the austerity pact, China would not be in a position to offer any support.

But, Hollande could tap an important historical source for establishing unique ties with China. France and China have previously enjoyed a 'special relationship' built on geopolitical common interest. At the height of the cold war, president Charles de Gaulle courageously established full diplomatic relations with China in 1964 against the odds. France was the first major Western power to do so; for communist China, this was a major diplomatic breakthrough. De Gaulle and Mao Zedong respected each other, and both were rebels against the post-war international system designed and dominated by two superpowers.

Since 1964, the two countries have co-ordinated well in foreign policy and steadily built close economic ties. But the end of the cold war removed a critical aspect of their common interest in fighting the two superpowers.

Then came the Sarkozy presidency. Over the past three decades, French presidents have carried on the Gaullist legacy in dealing with China. But outgoing president Nicolas Sarkozy did much to dismantle the special relationship through, for example, his meeting with the Dalai Lama and unnecessary provocation over human rights prior to the Beijing Olympics.

The relationship between Beijing and Paris has deteriorated since. More significantly, Sarkozy also reversed the Gaullist geo-strategic tradition of maintaining a foreign policy fiercely independent of the US.

The background of Hollande, as well as the traditional posture of the French Socialist Party, could mean the US-French honeymoon is over. This is certainly encouraging to Beijing, which is keen to revive its special relationship with France based on a similar geopolitical vision.

But the problem is that the Socialist Party has little experience in China policy. Hollande himself has never visited China, and the last socialist president, Francois Mitterrand, was too preoccupied with European affairs, understandable at a time when the cold war was drawing to an end. The two countries must now quickly begin to fathom each other's true intentions and working habits to avoid any missteps.

It is interesting to note that Hollande has acted quickly to repair the damage done by his campaign language. It surprised everyone that the first foreign envoy he met was Chinese ambassador Kong Quan, not the German ambassador. Hollande said France recognises China's important influence over international politics and the economy and wishes to push forward economic and trade co-operation, according to media reports.

It is not clear whether Hollande has in mind rebuilding a sort of special relationship. If he does, we may expect bigger moves.

From the Chinese point of view, three issues are crucial. First, the old question of whether the EU will lift the arms embargo on China (a move that would be symbolically valuable, though, in practice, the sale of advanced weapons to China is strictly regulated); second, whether France will encourage the EU to grant China full market-economy status; and, last but not least, China's access to Europe's financial and hi-tech markets. So far, so good, but the real work has just begun.

Lanxin Xiang is professor of international history and politics at the Graduate Institute of International and Development Studies in Geneva